Asian Paints Q3 Preview: Profit May Have Grown In Double Digits

Asian Paints Ltd. is likely to register robust performance in the third quarter, with brokerages expecting high single-digit growth in revenue and double-digit increase in profit for the third quarter.

The company's third-quarter profit may have risen 23.3% year-on-year to Rs 1,353 crore in the quarter ended December, according to a Bloomberg estimate.

• Revenue up 9% at Rs 9,391 crore

• Ebitda up 16.4% at Rs 1,977 crore

• Ebitda margins at 21.1%

• Net Profit up 23.3% at Rs 1,353 crore

Macquarie maintained an 'outperform' rating for Asian Paints with a target price of Rs 3,800 apiece, citing that focusing on budget-end will help the company outgrow the market.

The brokerage expects double-digit volume growth during the second half of the current fiscal as well as for the next five to seven years. However, the company needs to focus on brand development given the long gestation period between customer purchases, Macquarie said.

HSBC Global Research expects the company to be resilient with upside risk to earnings in the third quarter. They believe that decorative paint is an attractive segment, and Asian Paints, being the sector leader, is well positioned to achieve double-digit volume growth over the next decade.

"The second-half outlook remains strong; expect a volume rebound in Q3, aided by a long festive season, deferred demand from Q2, and the wedding season," HSBC said. "We expect 10–14% volume growth in H2. The product mix should also improve as H2 is seasonally strong for higher margin emulsions."

"Overall, in H2FY24e, we expect Asian Paints to deliver sales and profit after tax growth of 9% and 19% year-on-year, respectively," the brokerage said. "For FY25e, we expect this growth to rebound strongly, at 16% and 12% — which is 1% and 6% above consensus."

HSBC Global Research maintains 'buy' on Asian paints with the target price raised to Rs 4,020 apiece from Rs 4,000 per share.